You Don’t have to Be Dead Broke to Qualify for Medicaid

You may have heard that Medicaid won’t help pay for long-term care unless you have very little in assets. It’s true the assets you can own are limited, but it’s also true that you don’t have to be destitute. You can keep your house, and even have substantial equity in it.

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Some people believe a prenuptial agreement will protect your assets if your spouse needs Medicaid. This only works in the event of death or divorce.

Nobody wants to think about being so broke they need Medicaid. But the fact is, Medicaid is the largest source of funding for nursing homes. Most of us like to assume we’ll never need that, but statistics show that among people age 65 and up, 70% will require long-term care of some kind. And of those, for 43% the average stay is 2.5 years.

What will that cost? The average annual cost of an assisted living arrangement in the U.S. in 2015 is $43,200, which is a bargain compared to the cost of a semi-private room in a nursing home. For that the average annual cost is $80,300 or $91,250 for a private room, according to the Genworth Financial Survey. Of course, that’s only the average.

The cost can vary widely by the state, and possibly the city. If you live in Alaska, you are probably surrounded by natural beauty. But if you enter long-term care, you’d better be wealthy. In 2015, the average annual cost of a private or semi-private room in a nursing home is a whopping $281,415. That’s by far the highest cost in the nation. You can find details and costs for various levels of care — assisted living, nursing home private room or semi-private room — for your state and area by looking at the Genworth Financial Survey for 2015 at https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html.

Won’t Medicare Help?

Medicare will pay for long-term care for up to 100 days of “skilled nursing care” for each illness. And to qualify you must be in a Medicare-approved facility within 30 days of entering the hospital for a stay of at least 3 days, for the same condition as the hospital stay.

You may have heard that Medicaid won’t help pay for long-term care unless you have very little in assets. It’s true the assets you can own are limited, but it’s also true that you don’t have to be destitute. You can keep your house, and even have substantial equity in it. In 2015 in fact, you can have equity of $552,000 (and in some states, $828,000). But also if your spouse or another dependent relative remains living in the home, there is no equity limit.

The spouse of a nursing home resident is called a “community spouse.” The community spouse can keep one half of the couple’s joint assets up to $119,220 in 2015. This figure is adjusted for inflation each year.

Should You Transfer Money to Your Children in Order to Qualify for Medicaid?

Many people do transfer money to their children or someone else in the belief they will qualify for Medicaid. Be warned, doing this can backfire. Medicaid can penalize you if you transfer money to others, without getting something of fair value in return. The penalty is in the form of a period of ineligibility for Medicaid, and the length of time of ineligibility depends on how much money is involved. Your state will look at all the asset transfers made within five years (called the “look-back” period) before applying for Medicaid. You can, however, transfer money to your spouse without a penalty.

Here’s an example from elderlawanswers.com of what can happen if you transfer money during the look-back period:

If you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months ($100,000 / $5,000 = 20).

Elderlawanswers.com says, there’s actually no limit to the number of months you can be ineligible based on your monetary transfers.

There are also other transfers that won’t render you ineligible, such as to a blind or disabled child or other individual under age 65, either a direct transfer or placing money in a trust. The rules are specific, so don’t transfer any money until you talk to an elder law attorney to be sure you are within the parameters.

Other Common Misconceptions about Medicaid Eligibility

Some people believe a prenuptial agreement will protect your assets if your spouse needs Medicaid. This only works in the event of death or divorce.

You may know that you can give away up to $14,000 to any recipient without incurring a gift tax. But when it comes to Medicaid, such a gift could still trigger a period of ineligibility if made within 5 years of the look-back period.

Before applying for Medicaid, it is crucially important to consult with your elder law attorney.

Exempt Assets

Exempt assets are those which Medicaid will not take into account (at least for the time being). In general, the following are the primary exempt assets:

The home, regardless of the value if it is your principal residence, and if you intend to return home (even if, in the end, you cannot). Also if your spouse or other dependent relative lives there.

Household and personal belongings such as furniture, appliances, jewelry and clothing.

Wedding and engagement rings.

One vehicle.

Burial spaces and certain related items for you and your spouse.

Irrevocable prepaid funeral contract.

Value of life insurance up to $1,500 or less. If it does exceed $1,500 in total face value amount, then the cash value in these policies is countable.

$2,000 cash.

Sample Nursing Home Costs

Here is the cost of a semi-private room in a nursing home in select states: